Lawsuit: Knight Denies Attempting USA Truck Takeover

Knight Transportation in federal court documents denies it violated a confidentiality agreement with USA Truck, and also denies it’s attempting a hostile takeover of the Van Buren-based trucking company.

USA Truck, in a breach of contract lawsuit filed Oct. 10 in Crawford County Circuit Court, claims Knight is using private confidential information acquired during negotiations for the potential sale of USA Truck, in a hostile takeover attempt in violation of a confidentiality agreement signed in February 2012.

The lawsuit has since moved to U.S. District Court in Fort Smith.

In a 28-page, paragraph-by-paragraph response filed Friday, Knight acknowledges a confidentiality agreement exists, but denies violating the agreement and denies a hostile takeover attempt, while agreeing October filings by Knight with the Security and Exchange Commission show it owned 12.4 percent of outstanding USA Truck stock and is the largest single shareholder of USA Truck stock.

Knight’s September filings with the SEC showed it owned 7.9 percent of USA Truck outstanding stock at that time.

In the short term, USA Truck is seeking a temporary injunction to “oblige Knight to honor the confidentiality agreement” while lawsuit is pending, that would be permanent in a final order at the conclusion of the case.

USA Truck is asking the court to: prevent Knight from using the confidential information other than in connection with negotiations with USA Truck; prohibit use of the information in connection with any purchase, sales or trading in USA Truck securities; prevent Knight from disclosing any negotiations with USA Truck; prohibit Knight from proceeding with acquisition of USA Truck other than through a negotiated transaction with USA Truck; require Knight to dispose of USA Truck shares purchased using confidential information in an orderly and appropriate manner; and award USA Truck its cost, interest and attorney’s fees, according to the complaint.

Knight asked the court to dismiss USA Truck’s complaint.

USA Truck repeatedly has turned down an unsolicited buyout beginning offer of $242 million, at $9 a share, because it “undervalues” the stock, according to its complaint. The proposal includes $95 million in equity value of USA Truck and $147 million in company debt.

That offer — which USA Truck first rejected Sept. 26 — came after discussions about a possible negotiated sale of USA Truck to Knight stalled.

With three years of losses, the largest a $6.1 million loss in the third quarter of 2012, USA Truck in February named trucking industry veteran John Simone as president and CEO to lead its turnaround strategy. USA Truck attributed the third-quarter 2012 losses to an increase in workers’ compensation and health claims, and the write-off of the costs for deferred debt issuance.

“In sum, because Knight’s breaches of the confidentiality agreement have facilitated its purchase (through Knight Capital) of a substantial amount of USA Truck that USA Truck expects Knight will vote at USA Truck’s next annual meeting to further its hostile takeover of USA Truck, USA Truck requires a trial on the merits of this action prior to USA Truck’s annual meeting, which will occur in or around May 2014, at which time USA Truck’s shareholder rights plan will expire if it is not renewed,” according to the motion.

Without an expedited trial, USA Truck could cease to exist “due to Knight’s hostile takeover,” according to USA Truck.

USA Truck is seeking an April 2014 trial date.

Knight hasn’t answered the latest motion, and the court is yet to act on it.